Bloomberg News

Ringgit Erases Gains on Concern Funds Cutting Bond Holdings

September 28, 2011

Sept. 28 (Bloomberg) -- Malaysia’s ringgit fell on speculation global funds will cut their holdings in local- currency assets as the lingering debt crisis in Europe damped risk-taking.

The currency erased earlier gains, paring yesterday’s 1.1 percent rally, which was its biggest advance since June 2010. Reports showed Franklin Templeton Investments cut its holding in South Korean bonds yesterday and BNP Paribas SA said it has moved money out of local-currency bonds. Ringgit-denominated bonds have stalled this month and are poised to end a seven- month rally.

“There’s still the risk of fund outflows from Asian markets if Europe fails to put actions to work,” said Lam Chee Mun, a fund manager in Kuala Lumpur at TA Investment Management Bhd. “We still think there is further downside to the market.”

The ringgit declined 0.2 percent to 3.1565 per dollar as of 4 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency has depreciated 4.3 percent since June 30, headed for its first quarterly loss since March 2009.

The currency earlier gained as much as 0.6 percent after Germany yesterday pledged support for Greece. Greek lawmakers voted 155 to 142 yesterday to approve a property tax to help plug the budget shortfall, taking it a step closer to securing an 8 billion-euro ($11 billion) aid package next month.

Malaysian assets are “undervalued,” Prime Minister Najib Razak said in Kuala Lumpur late yesterday.

Malaysian three-year notes fell for a second day, driving yields up to the highest in seven days. The yield on the 3.434 percent note due August 2014 climbed 13 basis points, or 0.13 percentage point, to 3.29 percent, according to Bursa Malaysia. The rate reached a seven-week high of 3.81 percent on Sept. 19.

Morgan Stanley, Citigroup Inc. and Barclays Capital have singled out Indonesia, Malaysia and South Korea as the most vulnerable to a bond market selloff, citing a high proportion of foreign ownership of local debt.

Global funds owned 186.5 billion ringgit ($59 billion) ringgit-denominated securities in July, according to data published by Bank Negara Malaysia, including a record 95.4 billion ringgit of government bonds. The central bank will publish August data on Sept. 30.

--Editor: Barry Porter

%MYR

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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